State to take a ‘balanced approach’ to budget cuts, Spaulding says

State agencies have submitted proposed budget reductions called for by the governor after a recent downgrade in the revenue forecast for the current fiscal year.

Last week, each government agency submitted plans to achieve a 4 percent budget cut. Now the administration will determine which cuts will actually be made as the state seeks to compensate for a $31 million drop in projected revenue.

Secretary of Administration Jeb Spaulding (left) and Jim Reardon, commissioner of the Department of Finance and Management, at a news briefing. Photo by Hilary Niles/VTDigger

“We take a balanced approach,” Secretary of Administration Jeb Spaulding said. “The more broadly we can spread the reductions, the better it is.”

On July 25, state economists adjusted their revenue forecast for fiscal year 2015 from 4.8 percent growth to 3 percent. The budget cuts will total $31 million.

The administration will cut up to 4 percent from each agency’s budget, averaging 1.8 percent in cuts across all departments.

“There are some that can meet the target, some that have come in and said we can do better than the target,” Spaulding said. “What’s important for people to understand is that even if they have a 4 percent target, they shouldn’t assume that they’ll (be) cut 4 percent.”

This week, Spaulding said, the administration will review the proposals, considering the feasibility and long-term effects of the cuts.

“We look at factors like do they have time to implement those changes at this stage of the game, the impact on Vermonters, whether there’s a larger economic impact,” he said.

Monday, the Agency of Administration will present the proposed cuts to the Joint Fiscal Committee. The committee will hold a public hearing Tuesday afternoon and on Wednesday it will make a decision to approve, deny or amend the administration’s proposal.

“I would ask each of you to look at your entire organization and each appropriation and explore all opportunities,” wrote Jim Reardon, commissioner of the Department of Finance and Management, in a letter to state agencies.

“An expenditure reduction plan prepared for approval by the Joint Fiscal Committee shall indicate how it is designed to minimize any negative effects on the delivery of Services to the public, and any unduly disproportionate effect the plan may have on any single function, program, service, benefit, or county,” the document continued.

Tim Donovan, chancellor of the Vermont State Colleges, said this week that the system could face up to $1 million in cuts.

“There’s no way we could absorb a 4 percent increase without touching faculty,” Donovan said. He declined to comment on what those positions would be or which colleges might be hardest hit.

Spaulding would not comment on specific proposals or cuts the Agency of Administration is looking at.

Comments

Dave Bellini:

August 5, 2014 at 10:01 pm

Unless the state gets serious about reducing K-12 spending, every public sector agency, department and entity will eventually dissolve. The monster, the beast, K-12, keeps taking more and more resources.
There’s no “balance” unless the conversation includes education spending.

It is difficult to have balanced approach to state budget cuts when state revenues are out of balance. Corporate profits are soaring while corporate income tax avoidance goes from bad to worse. I encourage everyone to listen to or read the transcript of the NPR Diane Rehm Show “Debate Over Corporate Tax Inversions” that was broadcast two days ago.

What can the Vermont Department of Taxes do to fight multinational corporate income tax avoidance? Nothing. The separate accounting system allows multinational corporations operating in Vermont to shift profits to subsidiaries in foreign tax havens. In 2004, Vermont adopted combined reporting. Everyone should read the legislature’s Statement of Intent when it reformed the state’s corporate income tax (per Act 152/ House Bill 784). The intent appears to level the playing field for “all” corporations doing business in Vermont. However, it does not.
Instead, it tilts the playing field in favor of multinational corporations. Why, because affiliated “overseas business organizations” are excluded from Vermont’s tax base. Subsidiaries purposely located in foreign tax havens are excluded from Vermont’s tax base. This exclusion, this water’s edge loophole, is worth millions of dollars in lost tax revenues for Vermont and increases a tax disadvantage for smaller Vermont corporations which compete multinational corporations. Who helped the legislature write this exclusion into the law? IBM, GE, Unilever, Irving Oil?

The only way to solve corporate income tax avoidance is for the state to remove the loophole, the exclusion of overseas business organizations, and adopt worldwide combined reporting, approved by the US Supreme Court..twice – in 1983 and 1994.

“The US has the HIGHEST corporate taxes in the WORLD.” That’s true of marginal tax rates, but it ignores the reality that few corporations actually pay those rates. Marginal rates are what you find on the tax tables, but they are levied only on what is considered to be TAXABLE income, and US corporations enjoy a myriad of deductions, exclusions, and credits. Many of the largest corporations in America pay NO corporate income taxes.

GAO recently examined the matter and determined that “For tax year 2010 (the most recent information available), profitable U.S. corporations that filed a Schedule M-3 paid U.S. federal income taxes amounting to about 13 percent of the pretax worldwide income that they reported in their financial statements (for those entities included in their tax returns) . When foreign and state and local income taxes are included, the ETR [effective tax rate] for profitable filers increases to around 17 percent.” http://gao.gov/assets/660/654958.pdf These effective tax figures put the US on the low end of the middle of OECD countries on the basis of federal income taxes paid and just above the average on the basis of ALL taxes paid (including state and local).

Oh nonsense! The U.S. has a very low EFFECTIVE TAX RATE for corporations, as Paul must surely know, due to all of the loop holes and creative accounting by the big boys. So working people now pay a much higher proportion of the taxes while the big corporations pay hardly anything.

Paul,
That may be so, but it doesn’t explain why the economists overestimated income and why the legislature passed a budget that spends every penny of anticipated revenue without planning for possible revenue shortfalls. I think new economists and better budget planning are in order.

Excellent comments, Nancy Gardner. Thanks for the information. Wonder if other states hold these corporations harmless like Vermont does?

The legislature should investigate this issue in the upcoming session. As a small state, we need all available tax revenue, because what doesn’t come out of one pocket has to come out from another. That the “other” pocket is usually the Vermont taxpayer.

“The legislature should investigate this issue in the upcoming session. As a small state, we need all available tax revenue,…..”

Or the state can live within it’s means, and stop growing government and stop playing social engineering without any idea of the consequences if it is NOT done correctly which puts added pressure on….. to increase…..TAXES!!!!

How many multinational corporations operate in the state and what is the total number of employees who work for those corporations? (I don’t know that answer?)

It seems to me, a great way to drive these evil corporations out of the state would be to increase their…..TAXES!!!

Kinda makes ya wonder….
The state is run like a Bad business owner runs his business… He owns a restaurant and can’t pay his suppliers… just before he goes broke he gets a GOLD VISA (GRANTS) in the mail… He pays his bills with the VISA… Has 90 days before the next payment.. In the mean time he prays that he will get a GOLD MASTER CARD (GRANTS) to pay his suppliers and pay off the GOLD VISA… When all this FREE MONEY DRIES UP the state will go broke in 7 minutes…. The gross state product isn’t Maple Syrup– ITS GRANTS.. check out the below linkhttp://finance.vermont.gov/sites/finance/files/pdf/annual_grants_rpt/2013_Grants_By_Grantee.pdf

The 1.6% Medicaid inflation increase must remain in the FY’15 budget. You can’t promote health reform and starve the health care providers at the same time. Year after year community mental health and developmental service agencies have not been given increases sufficient to keep up with inflation, state employees, schools etc. Some agencies have staff turnover rates of 35%, leaving our most vulnerable citizens depending on staff with limited experience and skill. Quality care requires long-term trusting relationships, but staff are often forced to have second jobs just to afford to do this work. We can and must do better by fully funding Medicaid services for people with disabilities.

“Spaulding would not comment on specific proposals or cuts the Agency of Administration is looking at.”
.
Can Digger get a copy of the 4% suggested cuts? This administration thumbs its nose at transparency. What will they tell joint fiscal? “Wait until after the election” ? Their credibility is downgraded more than their revenue.

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